Extra interest-free loan for sugar mills to pay cane arrears

New Delhi, Jun 23 (PTI) : The Union government on Monday decided to provide additional interest-free loan of up to Rs 4,400 crore to cash-starved sugar industry for paying cane arrears.

In order to bail out sugar mills that are unable to pay Rs 11,000 crore dues to sugarcane growers, the government also decided to increase the sugar import duty to 40 per cent from the existing 15 per cent and extend subsidy of Rs 3,300 per tonne on export till September this year.

Efforts will also be made to ensure 10 per cent ethanol blending with petrol.

These decisions were taken at a high-level meeting called by Food Minister Ram Vilas Paswan following the Prime Minister's direction.

The Principal Secretary to the PM, Nripendra Misra, and Cabinet Secretary Ajit Seth were also present in the meeting.

After the meeting, Paswan said: “We have taken four key decisions. We have decided to extend the interest-free loan given against excise duty paid by sugar mills for five years instead of three years.”

Mills can avail themselves of additional interest-free loans of up to Rs 4,400 crore from banks, he said, adding that this will improve their cash flow to make cane payments.

The minister said the department is yet to calculate the exact interest-free loans to be provided to the industry.

In December, the Centre had approved Rs 6,600 crore interest-free loans for the sugar industry exclusively for clearing sugarcane arrears. It decided to give loans via banks equivalent to the excise duty paid by the mills in the past three years.

“These decisions will be announced subject to the condition that mills give guarantee that they will clear Rs 11,000 crore sugarcane arrears at the earliest,” Paswan told reporters.

”We don't have any problems to announce these incentives formally if millers are ready to make payments. If they give assurance today, we will announce incentives today itself.”

He said some of the decisions would be notified by ministries concerned, while some require the Cabinet nod.

Besides interest-free loan, Paswan said, “We have decided to increase the sugar import duty to 40 per cent from the current 15 per cent and extend the sugar export incentive of Rs 3,300 per tonne till September this year.”

Paswan said that the Petroleum Minister has assured 10 per cent ethanol blending with petrol. Currently, ethanol blending is not even two per cent.

Expressing concern over mounting cane arrears, Paswan said, “While the Centre fixes the cane price, some states are fixing higher prices that are putting burden on millers. There should be a holistic view on pricing.”

The sugar industry has been facing a cash crunch due to higher cost of production and lower selling prices in the wake of surplus output over the past few years.

Currently, sugarcane arrears stand at about Rs 11,000 crore across the country, with the maximum of Rs 7,200 crore in Uttar Pradesh.

Mills say they are facing a cash crunch as domestic prices have slipped below the cost of production, hurting their profits. They also fear domestic prices could fall further if cheaper imports are not curbed.